A Colorado broker is working with a buyer who is purchasing a property in a mountain resort community that has a 2% local real estate transfer tax under a home-rule ordinance. The buyer's lender requires that all transfer taxes be disclosed on the Loan Estimate and Closing Disclosure under TRID. The buyer asks the broker whether the local transfer tax will affect her ability to get a conforming loan. Which response best reflects the intersection of Colorado local transfer tax law and federal mortgage lending requirements?
Correct Answer
B) The local transfer tax must be disclosed on the Loan Estimate and Closing Disclosure and is factored into the buyer's cash-to-close calculation, but does not affect loan eligibility for conforming loans
Under TRID (RESPA/TILA Integrated Disclosure rules, 12 C.F.R. § 1026.37 and § 1026.38), all transfer taxes — including local municipal transfer taxes — must be disclosed on the Loan Estimate and Closing Disclosure as part of the buyer's cash-to-close calculation. However, the existence of a local transfer tax does not affect loan eligibility for conforming loans (those meeting Fannie Mae/Freddie Mac guidelines). Conforming loan eligibility is based on loan amount, LTV ratio, borrower creditworthiness, and property type — not on the local tax environment. The transfer tax is a closing cost item, not a loan qualification factor.
Why This Is the Correct Answer
Why the Other Options Are Wrong
Deep Analysis of This Financing Question
Background Knowledge for Financing
Real World Application in Financing
Common Mistakes to Avoid on Financing Questions
Related Topics & Key Terms
Key Terms:
Related Concepts
A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as the FHA, VA, or USDA. It is originated and funded by private lenders and may be conforming or non-conforming.
The debt-to-income ratio (DTI) compares a borrower's monthly debt obligations to their gross monthly income. It is used by lenders to determine how much mortgage a borrower can afford.
In the context of foreclosure, a deed transfers ownership of the foreclosed property to the new owner, typically the buyer at a foreclosure sale.
More Financing Questions
Which Hawaii rule controls when a lender intends to use power of sale foreclosure on residential property?
A Hawaii licensee is reviewing a candidate asks whether a Hawaii mortgage passes title to the mortgagee. What is the best answer?
Wisconsin recording fees are paid to the:
An appraisal of a Wisconsin dairy farm would most likely use:
Property tax prorations at a Wisconsin closing are typically calculated:
- → The FHA loan program in Wisconsin allows buyers to purchase with as little as:
- → Wisconsin's WHEDA (Wisconsin Housing and Economic Development Authority) assists homebuyers by:
- → Wisconsin foreclosures are:
- → Wisconsin uses which theory of mortgage law?
- → In Utah, what is the standard non-judicial foreclosure process under a deed of trust?
- → After a non-judicial foreclosure sale in Utah, does the borrower have a statutory right of redemption?
- → A Utah lender requires private mortgage insurance (PMI) on a conventional loan. Under what condition can the borrower request PMI cancellation under the federal Homeowners Protection Act?
- → Utah is classified as which type of state regarding the security instrument used for most residential mortgage loans?
- → Under Utah law, which of the following liens generally has the HIGHEST priority?
- → A Utah property has both a first mortgage and a second mortgage. If the first mortgage is foreclosed, what happens to the second mortgage?
People Also Study
Buyer Representation Agreement
8% of exam
Property Ownership
10% of exam
Land Use Controls and Regulations
8% of exam
Valuation and Market Analysis
10% of exam
Related Articles
Real Estate Exam Practice Questions by Topic (2026): Free Sets for Contracts, Agency, Financing
Get topic-based real estate exam practice sets and a simple sequence to move from learning to timed mocks.
Real Estate Exam Topics (2026): High-Yield Areas + Common Traps (Contracts, Agency, Financing, Fair Housing)
Learn the highest-frequency real estate exam topics and the traps that cause most wrong answers—plus how to study them.
Real Estate Exam Financing: Mortgages, APR, Amortization (2026) + 20 Practice Problems
Learn mortgages, APR, amortization, and the financing questions most likely to appear—plus practice problems.